Hubbard: Good Chance Obama Puts U.S. Over Fiscal Cliff

Oct. 24 (Bloomberg) -- The U.S. economy stands a good
chance of facing legislated tax increases and spending cuts if
President Barack Obama is re-elected next month, Glenn Hubbard,
a senior economic adviser to Mitt Romney, said today.

“There is a good chance, if the president wins, we go over
the cliff,” said Hubbard, who serves as dean of Columbia
Business School.

The so-called fiscal cliff in the U.S. includes $607
billion of tax increases and federal spending cuts set to kick
in automatically at the end of the year unless Congress acts.
Romney has called for reducing income tax rates by 20 percent,
capping individual tax deductions at $17,000 and eliminating the
estate tax and the alternative minimum tax.

Hubbard spoke at the Economist magazine’s Buttonwood
Gathering in New York. He said that the current tax system does
not support the size of government, especially at the rate the
economy is growing.

“The fundamental choice about government is how big it
is,” Hubbard said. “If we actually wanted the government the
president has proposed, you would have to raise taxes to pay for
it. The president has government 23 to 24 percent of GDP and
rising, there’s no way you could pay for that with the tax
system that we have.”

Largest Economy

Gross domestic product grew at a 1.3 percent pace from
April through June after a 2 percent rate in the first quarter.
Economists predict the world’s largest economy will expand at a
1.8 percent rate in the third quarter and 1.9 percent in the
fourth, according to the median of 82 estimates in a Bloomberg
survey conducted Oct. 5-10.

Hubbard also defended Romney’s plans to overhaul
entitlement programs, including Social Security and Medicare. He
called Romney’s proposal to increase the retirement age and
slowly reduce benefits on upper-income people as
“progressive.”

“I don’t recall another major party candidate for the
presidency ever to have been that specific,” he said. While the
country “can afford a strong safety net” it can’t afford a
“large welfare state for everyone,” he said.

Romney has said he would give future retirees the option of
purchasing private health insurance using government vouchers to
help pay for it.

Feldstein, Stiglitz

Later during the conference, Martin Feldstein, an economics
professor at Harvard University in Cambridge, Massachusetts, and
Nobel Prize-winning economist Joseph Stiglitz discussed
inequality in the U.S. Both economists called for changes to the
education system to create a fair society.

“We are becoming more geographically segregated,
socioeconomically,” said Stiglitz, a professor at Columbia
University in New York. “Our communities are becoming much more
homogeneous than they used to, and that’s spilling over into the
nature of the educational opportunities. So there are things
going on in our society that are having these adverse effects,
but it’s not just the failed schools.”

Feldstein said teachers need to better prepare students
with skills to help them get a job.

“For a lot of these kids, it would be much more useful at
some point to say ‘You’re going to need to have a job and here
are some of the kinds of skills that you would need to do that,’
” said Feldstein. “But of course that’s not what teachers want
to teach. They’re brought up to teach English literature, and so
they’re going to teach English literature. But that’s not where
the jobs are.”